The Housing Bubble

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The Sun Sentinel reports from Florida. “When GL Homes opened its eighth Valencia community last weekend, the Sunrise-based builder ended up with 72 contracts at Valencia Cove. The 823 homes are selling from the high $300,000s to low $600,000s. GL held a lottery so buyers could select their lots in the 55-and-over community. Earlier this month, the builder had another lottery for 11 model homes at Valencia Reserve, the 1,043-home Boynton development that now is sold out. And buyers camped out overnight for 18 lots at The Bridges near Boca Raton. ‘The market is really exploding,’ said Marcie DePlaza, division president for GL. ‘Between the lotteries and the camp-out, it’s been crazy.’”

“South Florida’s housing recovery is sneaking up on some sellers. Their homes are flying off the market in days or weeks, and the severe shortage of inventory is keeping them from quickly finding a new place. It took only a few weeks to find a buyer for Tracy Sachs’ five-bedroom Parkland home, but she immediately grew disillusioned when she started looking for homes to buy. ”We started panicking that we had nowhere to go,’ said Sachs.”

“Just as she and her husband, Mark, were seriously considering offering money to the buyer to let them out of the contract, they got a call from Jon Klein, their real estate agent. He told them the buyer’s financing had fallen through, and the deal was off. The couple immediately took the home off the market. They’re redoing the floors, painting inside and out and making other improvements. They want to wait at least a couple years for the housing market to settle down. ‘I was truly relieved,’ Sachs said.”

“Klein said he tells sellers they have to start looking the minute they sign a contract on their existing residence. ‘I had one client say to me that she had to go to the gym first,’ Klein said. ‘I had to tell her, ‘What’s more important? The gym or buying a house? You’re going to be homeless.’”

From WFTV. “Florida realtor figures show 51 percent of single-family home sales are all cash. WFTV learned cash buyers are moving quickly to grab deals and out-negotiate buyers who need a mortgage. When an Apopka house sold last December, the seller had few fears the financing would fall through, because buyer Rob Arnold offered $62,500 in cash. ‘Somebody like me, I buy ‘em and resell ‘em. At some point, I buy ‘em. Once they’re sold, I can buy some more,’ Arnold said.”

The Tampa Tribune. “Rising prices and bidding wars are back in the Tampa Bay area. Dale Hunter, who owns a Tampa real estate firm called Vanguard Real Estate, said he sometimes gets offers on homes within hours of listing them for sale. The sales go through quickly, he said, because the investment firms pay with cash and don’t have to wait for financing to come through. One problem emerging from the hot real estate market is a tie-up in some home appraisals. Appraisals may not be able to keep up with the change in home prices.”

“For example, a home that sold for $100,000 in January might fetch a price of $110,000 today. But an appraiser might value the home at only $105,000 based on the best available statistics, said David Donaldson, a senior loan originator at VanDyk Mortgage. That mismatch between appraisal and sale price can hold up a sale, he said. Nevertheless, Donaldson was bullish on real estate. ‘It’s a fantastic time, and anybody that does not own a home, should be trying to buy one,’ he said.”

The Tampa Bay Times. “After shrinking 10 percent during the bust, the typical new American home built last year grew to an unprecedented 2,300 square feet, U.S. census data show. Homes in the South ballooned even bigger, to nearly 2,400 square feet. Buyers are ‘able to purchase a little more home for their dollar,’ Tampa Bay Builders Association executive VP Jennifer Doerfel said, ‘and they’re trying to get into those homes quickly before the prices increase.’”

“When looking for a new home, Jolyn and Mike Schweitzer were open to townhouses or condos of any size. Instead, they upgraded, buying a 3,500-square-foot home off Clearwater’s Lake Chautauqua, with lofty ceilings, an office and an exercise room. ‘We felt this was a good investment, so we went to the top of our budget,’ said Jolyn Schweitzer, 58. Except for when their four adult children stay over, ‘I will never have to go upstairs.’”

The Herald Tribune. “If the housing market continues at its current rate of appreciation — a combination of strong demand from buyers and dwindling supply of homes for sale — prices could be back to their boom-time peak within seven years, according to a new analysis of data by the Herald-Tribune. ‘Prices are definitely going up everywhere right now,’ said Shannon Moore, broker and owner of Green Lion Realty in North Port, who represents foreclosure investors. ‘I see that continuing for at least the next three years.’”

“Several speed bumps stand in the way. The first is an estimated shadow inventory of 11,102 foreclosures expected to hit Southwest Florida’s housing market during the next few years, according to RealtyTrac. ‘We still have a lot of distressed inventory, and furthermore, at some point the national economy has to begin wresting with the debt service,’ said Dennis Black, a real estate consultant in Port Charlotte. ‘The price increase we have been seeing, particularly from the Wall Street funds, is speculation at its highest level.’”

“By far the biggest driver of Southwest Florida’s recent real estate appreciation has been institutional investors which have been buying foreclosures by the score for use as rentals. Because those companies are paying as much as 45 percent more for their purchases than the homes are worth — as determined by appraisers through comparable properties in those neighborhoods — these recent foreclosure-buying sprees are forcing some smaller investors and other homeowners to overpay for their purchases.”

“Those inflated purchases will now become the new standard for real estate ‘comparables’ used by appraisers — leaving values that are much higher than market conditions would otherwise merit, said Jack McCabe, a real estate consultant in Deerfield Beach. ‘We’re going to go through the whole thing we did last decade all over again,’ McCabe said. ‘Except, while last time it was the flippers and speculators pushing the market up, now it’s these hedge funds.’”

The Orlando Sentinel. “A while back, a Brevard County builder of luxury homes told me he had no choice but to go the cash-only route because appraisals were coming in so low, lenders wouldn’t give his potential buyers mortgages. University of Central Florida economist Sean Snaith calls the rate of cash transactions ‘unsustainably high’ and worries that average buyers are still having trouble getting mortgages. ‘We’re not going to get a healthy housing market with 50 percent of the transactions being cash,’ Snaith said recently. ‘The financing system has to allow the average buyer to get a mortgage.’”

“A rational housing market provides a sense of economic stability. It encourages owners to spend on home-improvement projects – which, in turn, creates jobs and pumps oxygen into the larger economy. But it thrives only if there’s enough credit available to keep the gears turning for average buyers. It’s unreasonable to expect middle-class Floridians to come to the closing table with enough cash to purchase a house. After all, they’re buying into homeownership, not a high-stakes poker game.”

The Jacksonville Business Journal. “There’s limited inventory, and real estate agents say any decent home put on the market draws multiple offers. So it might be a good time to sell — unless you’re one of the 54,000 folks who bought a home in Northeast Florida at the height of the real estate market. If you bought at the peak — mid-2006, with a median price of $210,000 — you’re likely underwater on your mortgage. That’s part of what’s creating the inventory crunch — so many folks can’t sell.”

“‘Unfortunately, it’s a long, hard slog for those folks,’ said John Tuccillo, chief economist for Florida Realtors. ‘It’s a matter of timing. If you bought your house in 2000 and sold it in 2009, the bottom, you still made money. If you bought in 2006, you may never make the money back. So it’s a matter of timing, but I think the market is moving in a positive direction. The folks in the market now will be benefitting over the next couple years.’”

The News Press. “The battle over a pricey Cape Coral home bought on the cheap at a foreclosure auction by two south Fort Myers men may not be over. After a Friday morning court hearing held shortly after Bob Mosher and Stan Garczynski took possession of the home, the lawyer for the former owners said the banks might fight to claim the waterfront property that was in the process of being foreclosed.”

“Nickie and Jim Haggart were evicted from the home Friday. They bought the property for $599,000 in 2004 and put more than $250,000 into it, but Nickie Haggart said they stopped making mortgage payments five years ago after being hit hard by the economic downturn.”

“The banks filed to foreclose on the home and, while that was pending, Chase Bank, the lender, continued paying the property taxes and home insurance but ignored a water assessment impact fee, Cohen said. As a result, the city placed a lien on the property that totaled $619.58 plus unspecified interest, penalties and attorney fees. It then foreclosed on the lien and the home went to auction in January, where Mosher and Garczynski snapped it up for $4,350.”

“Before the real estate market crashed, the 2,991-square-foot house was listed for $1.2 million. It is now assessed at $387,906.”

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Readers suggested a topic on the housing bubble. “How many of us are feeling like we time travelled back to 2006? I live in Long Beach, CA — lots of friends in their 30’s and 40’s talking about flipping homes, condo’s, and buying rental properties with low single digit cap rates because they are certain the prices will increase. Bonus flashback: AM radio news stations have been running ads for Rich Dad, Poor Dad seminars which will unveil the ‘new rules of money.’ Ohhh, boy, here we go again . . . .”

A reply, “I think its already run out of gas - since the true buyers (owner occupants or self-funded mom and pop investors) are gone, the PTB are trying to create new, marginal buyers to pick up the slack. It’s 2006 again pass the Coors.”

One asked, “What happened to the fraud? In all the debate over whether prices are actually rising or not in some places, everyone seems to be forgetting that much of the prior run up occurred because of fraud. Fraud on the applications, fraud in the comps, fraud by the banks lying to the eventual bag-holders. Now prices can rise back up to those bubble peak levels but there’s no fraud? Gimme a break.”

A reply, “Everyone in the RE business is in cahoots. When we bought our house last September, there was some worry that it would not appraise high enough. RE agent puts together a fancy shcmancy excel doc with comps that he gives to the appraiser. Voila! The house appraises for EXACTLY our offer price.”

And finally, “An entire generation of Americans have come to view <8% interest rates and 3% down on a mortgage as normal. When the economy inevitably readjusts and those 600K mortgage loans service at $6,000 a month (excluding taxes, maintenance, insurance et al), bubble-era prices will fall back into line with the historical norm."

The LA Times. “In the High Desert, separated from downtown Los Angeles by 65 miles and a mountain range, the housing market is finally gaining steam after the latest debacle. The reason is simple: Big new houses are selling in the $200,000 range, a mere fraction of home prices across much of the region. Cliff Neves is among the newest arrivals. The 36-year-old said he moved from the San Fernando Valley with his wife and children. He bought a new four-bedroom home in Palmdale last summer for about $190,000. ‘I am not paying $250,000 for a bucket,’ he said.”

“Behind Neves’ Palmdale home, rows of graded dirt lots flanked completed streets. The smell of wood filled the air one recent morning as a construction worker swung his hammer again and again on a wood-framed house, part of a new development by Harris Homes. The developer is being cautious, putting up about 10 to 15 homes at a time — and raising prices with each phase, said Andrew Fisher, the exclusive broker for Harris Homes.”

“Lancaster Mayor R. Rex Parris said residents’ long commutes concern him, adding that he knows hundreds of families who endure debilitating treks to the office. ‘The mother and father spend most of their productive hours on the freeway,’ Parris said. ‘You used to be able to afford to commute. Now you can’t. What good is it to have a cheaper house if you can’t afford to get there?’”

The State Journal Register. “Attorney General Lisa Madigan and Gov. Pat Quinn graced the same stage at different times Monday and talked about housing, not politics. Each addressed about 225 people attending the Illinois Housing Leaders Conference hosted by the Illinois Association of Realtors. ‘I will continue to fight for relief on behalf of Illinois homeowners to restore our housing market and ultimately to restore and revitalize our economy,’ Madigan said. ‘I look very much forward to continue to work with the Realtors to get this work done.’”

“‘We all know the key to economic recovery is making sure our housing market is operating at full speed, and I look forward to working with you on that this coming year,’ Quinn told the group. ‘…Realtors find creative ways to help everyday, hardworking people and families get that opportunity at the American dream. I really feel that your association is one of the most creative groups I’ve ever encountered. … You know how to make things happen.’”

“Phil Chiles of Springfield, president-elect of the Illinois Association of Realtors, said the appearance by the two statewide officeholders helps show the importance of housing and the group. ‘I don’t think there’s any doubt that housing is a crucial area in Illinois, and their coming shows that they feel like it’s important,’ Chiles said. ‘And I think that they understand that we’re a major player in the industry.’”

From CNBC. “The U.S. Treasury’s mortgage bailout is failing at an ‘alarming rate,’ according to a government watchdog, but architects of the four-year-old plan say that it is no worse than they expected. A new report from Special Inspector General for the Troubled Asset Relief Program points to disturbing numbers, but offers no reason for the high rates.”

“Treasury’s data shows that the longer a homeowner remains in HAMP, the more likely he or she is to redefault out of the program. As of March 31, 2013, the oldest HAMP permanent modifications, from the third and fourth quarter of 2009, are redefaulting at a rate of 46.1 percent and 39.1 percent. HAMP permanent modifications from 2010 also had high redefault rates, ranging from 28.9 percent to 37.6 percent.”

“Back in May of 2012, bank representatives complained that the back end debt-to-income ratios (DTI), (which include all debts upon which a borrower pays) for HAMP modifications were far too high. That is, borrowers were paying far too much of their incomes on debt, and the numbers were only rising. At the time, mortgage analyst Mark Hanson said, ‘A 64.3 percent DTI is so far out of scope with the pre-bubble years safe-and-sound 36 percent total DTI — and even typical bubble-years full-doc DTI’s of 50 percent — it is absolutely irresponsible. Servicers are pushing the envelope with respect to getting people to qualify.’”

“Today Hanson is the least surprised of anyone at the failure of HAMP modifications. ‘Because if you look at them structurally — sky-high DTI, LTV [loan to value] and low credit score — they make legacy Subprime loans look sane.’”

“‘People read headlines that ‘foreclosures are at 2005 levels’ and cheer. I say the high-risk distressed loans and foreclosures are still out there. They have just been called something different by banks and the government and kicked down the road a few years,’ says Hanson.”

The Desert Sun. “Some arguments are never over, even after the evidence is in. That’s the way it has been with the 2007-08 mortgage meltdown, and it could mean a repeat crisis. One side has persisted in blaming unscrupulous mortgage brokers and greedy investment bankers. The other side has struggled to point out that ‘affordable housing’ goals played a crucial role in the housing bubble that burst.”

“At a Sept. 25, 2003, committee hearing, Rep. Maxine Waters said: ‘Everything in the 1992 (Community Reinvestment) Act has worked just fine. In fact, the GSEs have exceeded their housing goals.’”

“Later testimony was re­inforcing. In a Dec. 9, 2008, hearing of the House Oversight and Government Reform Committee, former Freddie CEO Richard Syron said, ‘As the goals went up, and the goals were specified by HUD, you had to take more risk.’ Former Fannie CEO Franklin Raines testified that those goals compelled the companies ‘to entertain loans they would not have otherwise entertained.’”

“Fast forward to 2013. In January, the Consumer Financial Protection Bureau finalized a new Qualified Mortgage rule. It is heavy on monitoring the technicalities of loan origination, but permissive about small down payments, low credit scores and high debt-to-income ratios. This has been followed by an April 2 Washington Post report that ‘housing officials are urging the Justice Department to provide assurances to banks … that they will not face … recriminations if they make loans to riskier borrowers who meet government standards but later default.’”

“After the crisis we have sustained, it would seem that regulators would retreat to the traditional requirements for borrowing that make default unlikely. Instead, the old affordable housing goals seem to be the priority.”

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It’s Friday desk clearing time for this blogger. “No one has to tell Stacy Brannan and Adam Smith that central Ohio’s housing market is hot. In the past two weeks, the couple missed out on three Clintonville-area homes despite touring the homes almost immediately after they came on the market and, in one case, offering full price. ‘The housing market has been picking up, but we didn’t expect it to be this insanity, where we didn’t even have a fair chance to get anything,’ said Brannan, who is planning a June wedding to her fiance, Smith. ‘It’s hard to not get discouraged.’”

“Bidding wars, same-day sales and offers above the asking price — unheard of a few years ago — can now be found in pockets throughout central Ohio where buyers outnumber sellers. Doug Turlo, an agent with in Gahanna, found out firsthand how alive the market is when he listed a two-bedroom, 1,100-square-foot home in Grandview Heights earlier this month. By noon, within three hours of listing the home, he had scheduled seven showings, and by 3 p.m., he was in contract for slightly more than the $229,900 asking price.”

“‘That’s the single-hottest market in central Ohio,’ Turlo said. ‘As soon as anything comes available, it’s a race to get there.’ The buyer of that house started writing the offer with his agent, Lauren Swieterman, before even leaving the house. ‘I tend not to be pushy, but at the end of the day, I want my buyer to be happy, so I say, ‘If you want this house, you’ve got to move,’ said Swieterman. ‘It’s crazy.’”

“South Florida’s housing market is on a tear, and that’s reducing many first-time buyers to tears. Increased demand from investors and a shortage of homes for sale have left many first-timers struggling to find a place. ‘The first purchase by far is the most overwhelming,’ said Ken H. Johnson, a real estate professor at Florida International University. ‘It’s a daunting process anyway, but now they’re coming into the market at a time when they have to be competitive with a lot of savvy buyers paying cash.’”

“Aside from the overheated market, first-time buyers face strict lending standards that make it difficult to qualify for mortgages. Agents and analysts strongly recommend that buyers meet with lenders before they begin looking so they know exactly how much house they can afford. ‘Our biggest hurdle is getting buyers to buy into that,’ said Chip Rowand, an agent in Broward County.”

“Getting preapproved for a specific mortgage amount allows buyers to act quickly once they do find homes. Well-prepared buyers may be able to win over sellers by agreeing to pay more than investors, who typically look for discounts, Johnson said.”

“Economist Edward Deak, Connecticut Forecast Manager for the New England Economic Partnership, said that the Connecticut market is on pace to expand throughout the rest of the year. One of the main issues confronting the Connecticut and even parts of the national market is income growth among families. Simply put, if housing prices continue to increase while income stagnates and the job market remains muted, fewer people will be able to buy homes.”

“He said he expects the state median price to climb into the range of $250,000 to $255,000. But to get there, lenders will have to loosen their standards, he said, like they have in other areas of the country.”

“Looking for signs of a housing bubble? Check this out: Vienna-based Navy Federal Credit Union is marketing 100 percent financing, no-money-down mortgages. ‘This product is phenomenal for homebuyers,’ said Katie Miller, VP of mortgage products, adding that it was geared toward creditworthy ‘first-time buyers who don’t happen to have $40,000 in cash sitting around.’”

“Housing starts are now inching up. Mortgages are easier to obtain. Even the ‘piggyback loan’ has returned. And time to lock up friends and relatives with short memories. While we’re at it, let’s lock up the government and its compulsion to push homeownership.”

“Last year, the liberal-leaning Urban Institute came out with a truly awful plan to help struggling young people buy a home. It would expand the federal government’s Housing Choice voucher program to include homebuyers. Housing Choice now gives low-income people vouchers to help them pay rent. It’s a good program. But handing out vouchers to buy homes?”

“‘In many ways,’ its report says, ‘this represents the worst of all worlds for these families: a ‘buy high, sell low, but don’t buy low’ prescription …’ But if you can now buy low, and still can’t afford a home, perhaps you should be renting. In good times and bad, the soundest investment advice must be heard over the bullhorns of the American Dream marketing machine. ‘They’re not making land anymore,’ the promoters still say. Well, they weren’t making land in 2008.”

“Blithely ignoring the lessons of the housing bubble, Obama has rehired many of the Clinton hands who inflated it in the first place, pursuing the same misguided policies that try to force people into homes they can’t afford in the name of ‘fairness.’ There are ‘affordable housing’ mandates aimed at getting Fannie and Freddie to take on even higher-risk borrowers. Through the Federal Housing Administration, houses are being offered to some low-income subprime buyers with minimal down payment and heavy subsidies.”

“The administration also is making it easier to sue a bank for not giving a loan, using a legal strategy called ‘disparate impact.’ Officials don’t have to prove that the bank is being racist in its actions. ‘It’s particularly galling that the people who are using the crisis to extend regulation are the same ones who sponsored the government policies that created the crisis,’ said Peter Wallison, former member of the Financial Crisis Inquiry Commission, a government group created to look into the causes of the 2008 crash.”

“The original cast of the financial disaster are back starring in a bad sequel. So here we go again. Thanks to a failure of accountability, the same social engineers who caused the crisis have wormed their way back into power. And they’re doubling down on their monstrous mistakes, inviting another housing calamity.”

“The Federal Reserve is continuing a loose monetary policy that is very similar to the one that got our nation into the housing bubble of 2005 to 2008. The reality is that neither fiscal nor monetary policy is effective any longer in dealing with the systemic structural issues in the Western world’s economies. The Federal Reserve’s policies are borderline negligent and irresponsible. It is creating the next bubble, which will make the bursting of the housing bubble look tame.”

“The value of allowing an economy to correct for excesses is that it encourages people not to engage in that behavior again. When irresponsible behavior is rewarded by irresponsible actions on the part of the Federal Reserve, the stage is set for the next economic calamity. As with the housing market, all of those who benefited on the way up will be seeking additional federal bailouts. This time, however, the sole responsibility for the disaster will belong in Washington.”

“Nevada’s construction defect law is being challenged by builders and the construction industry at the Nevada Legislature. Chapter 40 gives lawyers representing homeowners almost automatic payment for attorney’s fees and expert-witness costs from developers in settlements and decisions against developers.”

“‘The reality is we have too many homes in Nevada, and until that surplus is worked off, homebuilders are not going to come back,’ said state Sen. Tick Segerblom, D-Las Vegas. ‘But it will come back. The same laws were on the books in 2005, 2006, 2004, and homes were being built like hotcakes. So why is it now that the law prevents them from being built?’”

“Some neighborhoods are still feeling the aftershocks of the housing bubble bursting. According to a Newport News reassessment report, some neighborhoods — especially condominiums or townhomes — were again hit with double-digit decreases in property value. Warwick Townhomes in Denbigh, which suffered a loss of 22.55 percent for the 2013 re-assessment. Single-family home neighborhoods that suffered double-digit declines included Beaconsdale Deer Park, and Peach Orchard.”

“Foreclosures continued to be the story for financially distressed neighborhoods, city officials said. ‘We didn’t have one (non-foreclosure) sale in Warwick Townhomes,’ said Earl Scott, a city assessor.”

“Earl Wynings, appraisal supervisor for the Newport News assessor’s office, said often a neighborhood will avoid steep declines for years, then suddenly experience a substantial downswing. Wynings said he believes Hilton Village has fallen more sharply because prices in the village rose quickly during the boom years of the mid-2000s. ‘I remember those homes going up mighty fast,’ Wynings said. ‘People were buying 1,200-square-foot homes that were built in 1918 for $200,000.’”

“Marin foreclosures declined by nearly 56 percent year-to-year in the first quarter of 2013, and far fewer homeowners in the county entered the foreclosure process, according to DataQuick. ‘It appears last quarter’s drop was especially sharp because of a package of new state foreclosure laws — the ‘Homeowner Bill of Rights’ — that took effect January 1,’ said John Walsh, DataQuick president.”

“But Robert Bradley, CEO of Bradley Real Estate in San Rafael, said, ‘I believe there remains a significant number of homeowners that are underwater that have been making their mortgage payments. Many of them are going through their retirement funds and other savings to make payments. I have been encouraging these homeowners to think of a short sale as a sound financial planning and business decision.’”

“The city was a tale of two crises Thursday. On one end of Broad Street, the sing-song voice of an auctioneer echoed through Newark Symphony Hall as about 100 hopeful investors bid on 79 foreclosed properties at bargain-basement prices. Down the street, at City Hall, local leaders and community advocates spoke in somber tones, debating a way out of a foreclosure crisis that continues to ravage city coffers and the pocketbooks of its residents.”

“‘It’s as if my life, security for my family, a roof over our heads is a game to them,’ Newark resident Grace Alexander said, referring to Bank of America, whom she said would not modify her mortgage when she fell behind on payments. ‘Our impending homelessness is not a game to us.’”

“A report published by the real estate industry in the Netherlands states that the average home price is now 18% lower than it was at the peak in 2008, while detached homes lost 20%-25%. A separate, earlier, report estimated that 20% of homes, or over 1 million, are now underwater. Today’s report comes hot on the heels of a study issued Wednesday by a government commission, which took a full year to prepare and 121 pages to explain what went wrong in the Dutch housing bubble, and what should be done now to correct it.”

“The core problem is simple: from 1995 to 2008 home prices more than tripled (rose 200%+). Hence, if we round off to a 20% drop from peak levels, or 60% from 1995 levels when prices were a third of what they were in 2008, there’s still an increase of about 150% from the starting levels that needs to be dealt with. We can discount for, and let’s be generous, perhaps 50% for overall price inflation, but that still leaves us with a 100% increase, which is quite a bit more than the 60% absorbed so far.”

“You see the problem by now, of course: like many other nations, the Dutch today feel quite strongly that they have suffered enough already, and someone somehow needs to revive the housing market. But like everyone else, the Dutch wish to wish away the problem of the not yet corrected part of the pricing model. In their case, they want 200% (1995+100%) to be the new normal (a.k.a. the new black).”

“Not surprisingly, the government report says that A) all parties are to blame, and B) the government needs to get more involved, i.e. make sure loans become available for people who now can’t get them, a.k.a. people who are not the most likely prime candidates to buy a home that’s still some 33% overvalued. Though, admittedly, sucking in those last remaining suckers would prop up moribund builders, agents and lenders for a while longer. Whether that’s a government’s task is at the very least highly questionable (obviously, other countries, including the US, work on similar resuscitation efforts).”

“Throughout the western world it’s been an active collaboration of the governments and the banks and the real estate industry and the builders. It’s a very simple story really: this is a widespread tale of western societies transforming themselves into pyramid schemes; or perhaps we should say one big global Ponzi scheme. And these Ponzi things collapse, and there’s nothing anyone can do to ‘fix’ that: the poisoned chalice must and will be emptied to the last drop. Only, the politicians - legally - have their hands in everyone’s pocket, so they can throw around trillions of dollars and euros to hide the process of the plunging system for as long as it lasts. That’s where we’re at right now.”

“And it’s not that all of these folks have evil minds; the intelligence level of politicians in the Netherlands approaches zero as much as it does in other western countries. The issue is that the entire system has blinders on. They can think in only one dimension, and that one-dimensional thinking can in the end lead to one end only: complete and utter disaster. It’s everything on red every time and every day, and that’s not how the world works. Every time black comes up is, for these people, nothing but another reason to put it all on red again next time. A surefire recipe for mayhem. But it’s all they have ever learned.”

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